Private Student Loans - The Pros and Cons

Federal student loans provide college students will money for tuition, books, and living expenses. Yet, it can take months to process a loan request. If you need money for college, and there isn't enough time to apply for a Federal student loan, consider a private student loan and get the cash you need in as little as five days.

What is a Private Student Loan?

A large number of college students receive financial assistance from a grant, work-study program, or Federal student loan. However, due to rising college tuition, traditional financial aid doesn't always the expense. When there is a difference between the education costs and financial aid received, students must find a way to pay the excess. Some people choose to use personal savings or a credit card. When neither option is available, a private student loan from a private bank can fill in the gap.

Private student loans are beneficial because they provide a quick solution to a tuition problem. Unlike Federal student loans, which can take several months to process and disburse, private student loans offer quick processing, and the money is normally distributed to the student within five business days. Once the student acquires the funds, the money can be used for multiple purposes such as tuition and books. Federal student loans place limits on how disbursed money is used. However, a private student loan can pay for a variety of education-related expenses such as a laptop, rent, transportation, etc.

Disadvantages of a Private Student Loan

While private student loans offer flexibility and quick processing, getting approved for such loans is no easy task. Federal student loans and grants do not require good credit, which is a nice feature since many college students have little or no credit history. Private student loans are quite the opposite. Because private banks approve the funds, loan requirements include a solid credit history and verifiable income. Plus, the interest rate on a private student loan is generally higher than a Federal student loan, which can equal a higher monthly payment.